Noncooperative Household Consumption with Caring

L.J.H. Cherchye, T. Demuynck, B. de Rock

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Abstract

We present a household consumption model that accounts for caring house- hold members, while allowing for noncooperative behavior in decisions on pub- lic goods. The intrahousehold consumption outcome critically depends on the degree of caring between the household members. By varying the degree of in- trahousehold caring, the model encompasses a whole continuum of household consumption models that are situated between the fully cooperative model and the noncooperative model without caring. This feature is used to define a measure for the degree of cooperation within the household. We also establish a dual characterization of our noncooperative model with caring preferences: we show that the model is dually equivalent to a noncooperative model with non-caring preferences that is characterized by intrahousehold transfers. Fi- nally, following a revealed preference approach, we derive testable implications of the model for empirical data. We demonstrate the practical usefulness of the model through an illustrative application.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Volume2011-019
Publication statusPublished - 2011

Publication series

NameCentER Discussion Paper
Volume2011-019

Keywords

  • household consumption
  • caring preferences
  • intrahousehold coop- eration
  • Nash equilibrium
  • revealed preferences

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    Cherchye, L. J. H., Demuynck, T., & de Rock, B. (2011). Noncooperative Household Consumption with Caring. (CentER Discussion Paper; Vol. 2011-019). Econometrics.